Many property managers know that they need cutting edge property management software in order to stay competitive, but all of the different options can be confusing! This eBook (originally published in '50 Interviews with Successful Property Managers') breaks down each factor you should consider when selecting the best software solution for your business, including thoughts on the future of this industry and how you can stay ahead of the curve.

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Selecting
The Right
Property
Management
Software
By Nat Kunes
Property management laws, regulations, and accounting standards are
changing rapidly and becoming increasingly more stringent. Investing in
the right property management software is now more important than ever.
However, choosing and evaluating software can be a challenging process
for many property managers.
In this eBook, we will discuss the past, present, and future of property
management software – how the industry has evolved and where it is
going. We will show you why and when you need property management
software, and help you understand how your business can benefit from
the right choice. We will also provide guidance on the features that really
matter (including a handy checklist to use when evaluating products). And
finally, we will provide some suggestions on where to look for the best
solution for your company.
Property Management Software Market Overview
Property management software has come a long way over the years. In the early 1980’s, property
management software was slow and cumbersome, running on early personal computers. Today, the
choices are vast and feature-rich, and many providers now offer property management software as a
web-based service.
At first, only a handful of companies offered property management software solutions. This quickly
changed in the 1990’s as dozens of companies were launched to provide software solutions to
property managers. Over the last decade we have seen a sharp retraction in products as the larger
software providers purchased smaller companies. The landscape has consolidated back to only
a handful of providers, resulting in fewer choices for property managers. In addition, many of the
remaining software providers have focused their product development to serve the larger property
management companies and real estate investment trusts, leaving the smaller and mid-sized property
management companies underserved. However, the good news is that in the last couple of years, a
few companies have been launched to address this need.
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Two Primary Types Of Property Management Software
Premise And Web-Based
Property management software can be divided into two main camps: premise-based or web-based.
Premise-based software is run on a local computer with a database, and typically the computer is
located in the property management office. The property management company purchases and owns
the software, and is then responsible for keeping the computer up and running and backed up daily.
Usually the premise-based software provider charges an annual maintenance fee, which means they
will only be available to fix problems with their software, not the machine running it.
Alternatively, web-based software can be used anywhere in the world with Internet access. It too is
fully maintained by the software provider, so there is no need to maintain a server running in
the office.
Another distinction in property management software is the option for integrated accounting. Some
software solutions have built-in accounting to create a one-stop solution. Property management
software providers without this functionality require that you buy an additional accounting program,
like QuickBooks, to get the accounting features. This can be expensive, and some property managers
find that getting the systems to sync up can be time-consuming.
Depending on the size of the portfolio you manage, different
features may be more or less important, and you should
consider how your business will use a specific one. Too many
features can make the software difficult to use and cumbersome
to learn for your property management office staff.
Another point to keep in mind is that the type of portfolio you
manage will affect your purchasing decision. A commercial
property manager will need a different software solution than a
residential or homeowners association property manager.
Why Do Property Managers Need Software?
Now that you have an overview on the property management software market, you may be wondering
if it is worth it for you to go through this process of evaluating a software solution. Here are some
business benefits of using property management software.
Move Toward A Paperless Office
Many property managers are moving away from using paper to save money as well as ‘go green.’
A paperless office typically involves e-mailing statements instead of using the postal service, online
document storage instead of vault services, or online payments instead of depositing paper checks at
the bank. A paperless office can drastically reduce operating expenses. You’ll avoid the time it takes
to search through mountains of papers, the real estate required to store the files, and the costs of
paper and ink. If you pay to store paperwork offsite, this is even more valuable as you can realize the
savings by discontinuing this service.
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Manage Growth And Increase Profitability
Another reason to look for property management software
is to effectively manage the growth and profitability of your
company. Good software solutions will have detailed reports
and charts for income, expenses, delinquencies, etc., which
can enable you to run a more efficient business. With this
type of data at your fingertips you can identify problems and
quickly implement steps to improve performance. It can also
help you find new opportunities to improve your cash flow and
profitability.
Maintain Compliance And Complete Documentation
Every property manager dreads receiving notice that they are going to be audited, but a good
software solution can make this process less scary. Property management software can help you
maintain accurate records and documentation, which will make an audit go much more smoothly.
Increase Your Marketing Efforts
Some property management software solutions include the ability to advertise vacancies on the
Internet (your website, Craigslist, etc). Property management software can make this process much
more efficient and allow you to reach many more potential renters.
When it comes to timing, many property management companies wonder when to invest in software.
It might be time to look for a property management software solution if:
• You have Excel spreadsheets that are so complicated - no one can figure them out!
• You are having trouble managing all the details regarding your portfolio.
• You feel like you are missing opportunities to generate more cash flow because you spend so
much time keeping your books straight.
What about property management companies that invested in a software solution years ago? Is it
time to switch to a new one?
Many of these products have outlived their expected life and are being pushed beyond their original
design and capabilities. If you are in this situation you may experience database crashes, or have
trouble getting support from the provider because they no longer support the product. Training new
employees on these systems can be extremely time-consuming as well. These antiquated solutions
also have not been updated for new tax laws and accounting regulation changes. If your business is
growing, these problems can be a real drag on productivity, and should be a strong sign that it is time
to evaluate new solutions.
What Should I Look For When I Am Evaluating
A Solution?
Choose Web Or Premise-Based Software
The first decision when evaluating property management software solutions is whether to choose
web-based or premise-based software.
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Here is a comparison of the advantages of each type of software:
Web-Based Software Premise-Based Software
• Lower initial investment • Data is stored locally in your office
• Faster, more cost-efficient deployment • Access is not dependent on Internet connection
• No software or hardware maintenance • Most costs paid up front
• Access data from anywhere • You own the software
• Continuous product upgrades
• Training and support included
Consider The Pricing Models
Another important consideration point is the pricing model for the solution. Many providers charge
by user. This model tends to discourage use of the software, as property management companies
are forced to try to share licenses and limit the number of people using the software at a given time.
A new model that is becoming more widely offered is the pay-per-unit model. This pricing method
scales with your business and is better suited to encourage the adoption of the software, as you can
allow as many people to use it simultaneously as needed.
Understand The Total Cost Of The Solution
An important note when evaluating the price of each solution is the difference between one-time
purchases and ongoing subscription services. Knowing the total cost of the solution is critical
because the upgrades, add-ons, and extra fees can add up. It’s like buying a car; often the base
model price is far from the fully-loaded price! When you evaluate the total cost be sure to identify
expenses for items such as training, support, add-on modules, and upgrade fees. These can be as
significant as the original product costs, and should not be overlooked.
Consider Savings
Be sure to consider any additional savings that the new property management software can offer with
integrated services that you may currently be paying for separately. These can include Ratio Utility
Billing, Website Hosting, Tenant Screening or Online Payment services.
Competitive Advantage
If one of your objectives is to grow your business, without impacting costs, you also want to consider
the types of offerings that will appeal to owners. Would they like the convenience of accessing their
financial reports online? Would a tenant liability insurance to protect their investment appeal to them?
To help with your evaluation of various products, here is a checklist with important criteria to consider:
q Data Migration (when switching to a new solution)
Can this product take all of my existing data?
How easy is the data migration process?
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q Complete Accounting
Will this product provide me with full double-entry accounting?
Is the accounting integrated and included?
Are the reports flexible enough for my business?
Will it help me comply with DRE regulations?
Can I run my reports in both Cash and Accrual mode?
Will it be easy to complete a bank reconciliation?
q Paperless Office
Will this product support the elimination of paper invoices?
Can I e-mail residents and owners, and maintain records of these interactions?
q Work Orders
Can I create and manage work orders (one-time and recurring)?
Can I e-mail vendors for faster completion of maintenance requests?
q Secure Access
Is this product secure and reliable with my data?
Can I download reports?
Can I restrict users’ access?
q Easy To Use
How quickly will my team learn the new product?
Is it intuitive and easy to navigate?
Can I find what I need within a few clicks?
q Search
Can I quickly and easily search for all types of information?
q Electronic Payments
Can my residents pay their rent online?
Can I seamlessly handle cash and money order payments?
Can I electronically pay owners?
Can I electronically pay vendors?
q Vacancy Posting
Can I quickly post vacancies online, to craigslist and on my website?
Can prospects apply online?
q Training
How much training is included with my investment?
If I hire additional employees, will I have to pay for more training?
Are FAQs and on-demand trainings offered?
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q Support And Upgrades
What are the additional charges (if any) for ongoing product support?
How often is the product updated?
Are client services managers available by phone or e-mail when I need help?
How is feedback collected from customers for ongoing product development?
q Websites And Portals
Is a property management website included as an option with purchase?
Can I easily post vacancies to my website?
Can I have unique branding, and unique sites for each complex I manage?
Can my tenants easily pay rent and submit maintenance requests online?
Can I provide an owner portal for easy access to owner statements and reports?
q Pricing
Is the pricing clear and transparent – do I know exactly what I’m paying for?
What do the additional features and upgrades cost?
q Integrated Features
Does this product include features that will save me time and money?
Consider:
Tenant Screening
Tenant Insurance
Ration Utility Billing System
Smartphone Apps
Finally, take a hard look at cost vs. value. Try to calculate a quick return on investment and figure out
how long it will take you to realize the savings that these solutions will offer.
The Future Of Property Management Software
Integrated Marketing
Integrated websites, and the ability to post vacancies to sites like Craigslist.org on the Internet, are
new emerging features. With an integrated website, all hosting duties and design work are handled by
the provider, making things easy for a property management company. Because your data is centrally
stored in the property management software, some providers allow you to add and remove vacancies
with a few clicks.
Online Payments – From Tenants, For Owners, For Vendors
Another offering that is becoming more prevalent is integrated payments. With integrated payments
you can accept online payments from residents in the form of electronic deposits or credit cards. You
can then pay property owners via electronic funds transfer. Payments are received much faster, as
you avoid the time required to process paper payments and deposit them at the bank. This can be a
great benefit to your owners as they are paid faster and more securely.
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Other Payments
If your tenant base is lagging in adopting online payment services, consider options available to
accept other payment types, while still simplifying your record keeping. There are services available,
some integrated with property management software, that allow tenants to make cash and money
order rent payments at convenient locations near them. The funds are then automatically deposited in
your account, saving you a trip to the bank and making manual receipt entry obsolete.
Screenings
There are numerous advantages to having a prospect screening service integrated with your property
management software. If you can accept applications online, there’s no need to transcribe the
prospect’s sensitive information into a system, or faxing the information to a third party service. When
evaluating software with integrated screening make sure to get a glimpse of the report: Is it easy
to read? Does it include all the information you need to learn about a prospect? Also, make sure to
inquire about any additional on-boarding costs for the service.
Insurance
There’s a growing trend in the property management industry requiring tenants to purchase tenant
liability insurance. It is a great selling point when marketing to new owners, as it offers an additional
protection on their investment. If you require your tenants to purchase an insurance policy, it is
important that your management software allows you to track the policy information and expiration
date. Some property management software companies even go as far as offering insurance services
at competitive pricing, freeing you of the hassle of tracking and updating tenants’ insurance
information.
Portals (Owners And Residents)
Online portals are also popular as an integrated product. For residents, they provide a one-stop
shop to see important announcements about the community, pay rent online, or submit maintenance
requests. For owners, they provide a place to see all statements and tax documents associated with
their properties. Directing people to these portals can save your company considerable time, since
you won’t have to mail everything or answer as many questions by phone.
Full Accounting Suite
Whether you run your accounting in a cash or accrual basis, make sure to select software that can
support both and allow you to seamlessly run financial reports in both formats. This will allow you to
cater to owners or financial institutions that have specific reporting needs.
Where Do I Find the Right Product For My Business?
Clearly, a good property management software solution can be valuable for your business. But finding
the right one for you can be difficult. Some good places to look can be found on the Internet through
a Google search or online peer groups, blogs, forums, and LinkedIn discussions. By far the best place
to get a recommendation, is from a peer who is already using a good solution. Don’t know any other
property managers? Your local chapter of a national association for property managers can be a great
place to find and talk to peers.
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Here is a list of online places to look for ideas and recommendations:
• Property Management News, www.propertymanager.com
• Multifamily Insiders, www.multifamilyinsiders.com
• LinkedIn – Property Management Professionals group, www.linkedin.com/groups?gid=36805
• National Association of Residential Property Managers, www.narpm.org
• National Apartment Association, www.naa.org
• Local apartment associations in your city
The right property management software can take your business to the next level. By spending time
evaluating solutions and understanding what the most recent products offer, you can provide a higher
level of service to your residents, owners, and investors.
Excerpt: How to Select the Right Property Management Software, written by Nat Kunes (AppFolio)
Nat Kunes is the Director of Product Management at AppFolio and is tasked with ensuring the effective
development, communication, and execution of the AppFolio Property Manager product line.
Originally Published in the book titled “Successful Property Managers” by Michael Levy
The contents of this eBook were originally published in the book titled “Successful Property Managers” (Volume 1,
Appendix C) by Michael Levy. Michael Levy is President of Levy Consulting, LLC, a consulting company specializing
in helping individual real estate investors and property management companies manage their properties more
effectively. For more information or to order the book, go to: www.SuccessfulPropertyManagers.com.
About AppFolio
AppFolio provides complete web-based property management software designed for the modern property manager.
Learn more about AppFolio at www.AppFolio.com.
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